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Credit card Supportive or Un-supportive......
Almost everyone I know in Singapore owns a credit card. In fact, half the people I know have 2 or more credit cards. Personally I’ve had a love-hate relationship with credit card – I love it when I have to go shopping, but I hate it when the bill arrives in my inbox. I’m sure all of us have felt this way at one time or another in our card-filled lives. So are credit cards our best friend or enemy? Like many people might have told you before, it totally depends on YOU. It depends on how you use it or abuse it.
We all have that one friend who hides from his credit card bills. He’s scared of them, he refuses to open them – oh, you know the drama. But how did he reach this situation? Let us look at the common mistakes we do to make an enemy of credit cards.
Paying just the minimum due: If you are in the habit of paying only your minimum due of the credit card bill each month, you are carrying forward your bill and will end up paying more money to the bank in the form of interest over time. For example,
Buying over your budget: We tend to forget that credit cards are a form of loan. You’re not using your own money to pay for the things you buy with credit card, but are taking a short-term loan from the bank to buy something you can’t currently afford. So, common sense suggests that when using credit cards, you should not go on shopping sprees, impulsive purchases, or over-spending unless you can afford to pay off the bill in the next couple of months.
Owning multiple credit cards: Having 1 credit card is good, having 2 is okay, but if you have 3 or more credit cards, you’re digging your own financial grave, lah. Don’t be tempted to own one card of every kind, or one from every bank. Owning many cards and not being able to complete payments on them, also hurts your credit score, which in turn could ruin your chances of getting a loan when you really need it.
When Can Credit Cards Be Your Best Friend:
Even atom bomb technology is good when used responsibly, eh? If you want the credit card to be your friend, you need to be wiser than the impulses the credit card drills into your heart. Here are some tips to befriend that piece of plastic in your wallet.
Before you apply for a credit card, look at all the options available to you. Firstly, you should know what kind of card you need – cashback card, rewards card, travel or air-miles card, shopping card, grocery card, fuel card, etc. Research on the kinds of cards and their benefits so that you know which one suits you the best. Look for cards that give you an interest-free period. Don’t stick to cards offered by your bank alone, do some window shopping – most banks don’t need you to have an account with them to buy their credit card.
Need-based spending: Instead of buying everything you like, buy only the things you need. This will ensure that you do not end up swiping your card indiscriminately.
Beat the interest rate: Never forget the interest rate on your credit card. Don’t just pay the minimum due and think you’ll be all right – this only serves to add up the interest on the original spending. Nowadays many banks offer interest-free period of 30-50 days, which means that if you pay your credit card bills in their entirety every month, you’re practically not attracting any interest on your purchases.
Stick to your budget: When you make purchases, ask yourself if you can afford to buy with the cash in your account (or with your debit card). If yes, of course you can go ahead and buy it with a credit card, because you would be able to pay off the bill the very next month. If no, then would you be able to pay off the bill in a few months – say, 3-6 months? The less you drag payment of your bills, the more you will save in the way of interest on your spending.
Friends and enemies are partly created by ourselves. How we use credit cards is the most important part of owning them. So stop being uber-fond of your credit card – that is not going to make it your friend – but learn to be cautious and spend wisely.
